baking regulation act 3

8/8/2019 Baking Regulation Act 3

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(contd.)(contd.)

Borrowing restricted to members Share linking to borrowing No listing / no trading of shares Strong in helping financially weaker section


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, ,Developmental Functions(Carried out through the Urban BanksDepartment)

er ves au or y o con ro an superv sethe urban banks through the BankingRe ulation Act 1949 As A licable toCooperative societies)


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. .. . --

Part II Business of Banking CompanyPART II-A - CONTROL OVER MANAGEMENT

- -banking companiesPART II-C - Acquisition of the Undertakings of BankingCompanies

- uspens on o us ness an n ng up oBanking Companies

PART-III-A - Special Provisions for Speedy Disposal of -

PART III-B - Provisions Relating to Certain Operations of Banking Companies

PART IV - Miscellaneous

College of Agricultural Banking, RBI , PUNE

PART V - Application of the Act to Co-operative Banks


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v . . , v . . ,

. . ,1949

RBI re ulates and su ervises the UCBs vide thevarious provisions of the Act applicable to UCBs

which is mainly relate to banking activities viz.-Maintenance of cash reserve and liquid assetsRestrictions on loans and advances

Power to inspect the books of accountsPower to give directionsThe ower to im ose enalt


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Relevant Provisions of B. R. Act, 1949Relevant Provisions of B. R. Act, 1949(AACS)(AACS)

RBI exercises its regulatory, supervisory anddevelopmental control on UCBs through the applicabilityo se ec prov s ons o e paren c o s sec on romMarch 1966

The duality of control was extended automatically to thesec or w e ex ens on o e c o e s


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u u . .u u . .

under the B. R. Act, 1949 (AACS):Registration of cooperative banks

ons u on o oar o sRemoval of directors

Superceding of the Board of Directors u ng o e coopera ve an s

Enquiry into the affairs of the UCBsEnquiry into the conduct of the CEO / Chairman /

Winding up of UCBs


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- -Bank, a Central Co-operative Bank and a PrimaryCo-operative Bank

Primary Agricultural Credit Society means a Co-

operative society:.financial accommodation to its members foragricultural purposes or for purposes connected with

2. The bye-laws of which do not permit admission of anyother co-operative society as a member

"central co-operative bank" means the principal co- operative society in a district in a State, the primary object of whichis the financing of other co-operative societies in that district: Provided that in addition to such principal society in a

district, or where there is no such principal society in a district, the State Government may declare any one or more co-operative societies carrying on the business of financing other co-operative societies in that district to be also or to be a

central co-operative bank or central co-operative banks within the meaning of this definition;


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"banking" means the accepting, for the purpose of lending or investment, of deposits of money from the

withdrawal by cheque, draft, or otherwise;"banking company" means any company which transactsthe business of banking



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v v

,primary agricultural credit society,

the principal business of which is to conduct bankingbusiness,the paid-up share capital of which is not less than Rs. 1lakh, andthe bye-laws of which do not permit any othercooperative society as its memberHowever, if a Cooperative Bank has subscribed to theshare capital of such cooperative society out of fundsprovided by the State Government then it can become amember


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(contd.)(contd.)

-society other than a primary agricultural creditsociety :

The primary object or principal business is thetransaction of banking businessThe aid u share ca ital and reserves of which areless than one lakh of rupeesThe bye-laws of which do not permit admission of anyother co-operative society as a member


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companies may engageborrowing, raising, or taking up of money

ac ng as agen s or any overnmen or oca au or yor any other person or persons

carrying on of agency business of any description



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(Contd.)(Contd.)

" " " ", ,

"banking", or "banking company ".No company other than a banking company shall use as

the words "bank", "banker" or "banking" and nocompany shall carry on the business of banking in Indiaunless it uses as part of its name at least one of suchwords



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Section 7Section 7 Use of the word Bank,Use of the word Bank,Banker, BankingBanker, Banking

use the word bank, banker and banking The Act allows the usa e of these names b a

primary credit society, or a co-operative society

formed for the protection of the mutual interestmortgage banks, or any co-operative society,which is not being a primary credit society but is

orme y e emp oyees o commerc a an s ora cooperative bank or a primary credit society ora coo erative land mort a e bank


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(Contd.)(Contd.)

Notwithstanding anything contained in Sec. 6 or in anycontract, no banking company shall directly or indirectly

except in connection with the realization of securitygiven to or held by it



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(Contd.)(Contd.)

- -Notwithstanding anything contained in Sec. 6, nobanking company shall hold any immovable property,

owsoever acqu re , excep suc as s requ re or sown use



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v v

Cash Reserve Ratio on a daily basis in thefollowing assets as n an an go

Current Account balances with RBI and with State

Cooperative Banks, District Central Cooperative Banksits subsidiaries, and nationalised banksThe present stipulation is to maintain 3 per cent of thenet demand and time liabilities on a daily basis


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v v (Contd.)(Contd.)

provisions of the Section 42 of the RBI Act, 1934

The present stipulation is to maintain 5 per cent of the Demand and

The returns are to be submitted in Form B within 7 days of the fromthe reporting fortnightThey are required to maintain a minimum of 70 per cent of CRRbalance on a daily basisIn case of shortfall in the maintenance of the required percentage of CRR, the amount of interest payable would be reduced by an amountcalculated at the rate of 25 er cent er annum on the amount of

shortfallIf penalty exceeds amount of interest payable then penalty is levied at3 per cent above Bank Rate on the amount of shortfall for the first

fortnights, if the default continues


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Section 19Section 19 Restriction on HoldinRestriction on HoldinSharesShares

other cooperative society except to such extentand subject to such conditions as the ReserveBank may specify in that behalf:

Provided that nothing contained in this section

shares acquired through funds provided by the StateGovernment for that purpose;

- , -operative Bank to which it is affiliated;

in the case of a primary Cooperative Bank, the holdingof shares in the Central Cooperative Bank of the State inwhich it is registered

8-Mar-10 21College of Agricultural Banking, RBI , PUNE


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Section 22 and 23Section 22 and 23 Bank and BranchBank and BranchLicensing of UCBsLicensing of UCBs

-

business unlessIt is a primary credit society orit is a co-operative bank and holds a license issued byRBI


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Revised Licensin Polic :Revised Licensin Polic :Present StancePresent Stance

To consider issuance of fresh licences only after a

comprehensive policy on UCBs, including an

sector, is put in place and a policy for improving thefinancial health of the urban co-operative banking

sector is formulated early


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branches; shifting branches

Can open place of business within the area of

operation temporarily for a month on thex , r , .


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(contd.)(contd.)

Annual Action Plan for branch expansion

For eligibility, UCB should have achieved thefollowing:

Net NPA < 8%Priroty sector target met

centre proposed for the branchCompliance with BR Act/RBI Act provisions

Branches only to financially strong banks Branches on a highly restrictive basis Mergers & Amalgamations encouraged


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u y u yu y u y

-

to maintain liquid assets in the form of cash, goldor unencumbered approved securities whichshould not be less than 25 per cent of the total of its demand and time liabilities.

demand and time liabilities in the form of cash, gold orunencumbered approved securities


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(Contd.)(Contd.)

of their holdings in Government and otherapproved securities.

The non-scheduled UCBs with NDTL of Rs. 25crore and above are required to have 15 per cent

.required to have 10 per cent of their SLRholdings in Government and other approved

secur es


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-- w x w x

,

Official Gazette, declare that, for such period andsubject to such conditions as may be specified insuch notification the whole or any part of theprovisions of Sec. 18 or Sec. 24, as may be

- operative Bank or class of Co-operative Banks,with reference to all or any of the offices of such

- ,the whole or any part of the assets and liabilitiesof such Co-operative Bank or Banks."



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Section 29Section 29 Account and Balance Account and BalanceSheetSheet

prepare balance-sheet and profit and lossaccount as on the last working day of the year inthe forms set out in the Third Schedule or is nearthereto

Section 30 Audit - Auditors to be appointed by the RBI not applicable for UCBs

Section 29 - Accounts and balance sheet - At the ex iration of each calendar ear or at the

expiration of a period of twelve months every banking company shall prepare a balance sheetand profit and loss account, in the forms set out in the Third Schedule or as near thereto

Section 31- Submission of returns - The accounts and balance sheet referred to in Sec. 29toget er w t au tor s report s a e pu s e n t e prescr e manner an t ree cop esthereof shall be furnished as returns to the Reserve Bank within three months from the end of

period to which they refer


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if the conditions subject to which the banks have been issuedlicence to undertake banking business continued to be fulfilled

earning prospectsIts affairs are not conducted in a manner detrimental to theinterest of the present and future depositors (section 22(3)(b))The general character of the management of the bank is notprejudicial to the public interest and the interest of the

.The bank is in a position to pay its present and futuredepositors in full as and when the claim arise (section 22(3)(a)


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(contd.)(contd.)

underScheduled UCBs - Once in a yearGrade I UCBs - Once in two yearsGrade II UCBs - Once in 18 months

-Grade IV UCBs - Once in a yearRBI may also scrutinize the affairs / books & accounts of

.

It may furnish a copy of the report only if arequest is made by the bank or if any adverseaction is contemplated against the bank


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Section 35 A Section 35 A Power of the ReservePower of the ReserveBank to give DirectionsBank to give Directions

that in public interest or in the interest of thebanking policy and to prevent the affairs of thebank from being conducted in a mannerdetrimental to the interest of the depositors and

RBI derives it powers to order winding up of an UCB orits reconstruction only for the "eligible cooperative bank"


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Section 36Section 36 Further Powers of Further Powers of Reserve Bank Reserve Bank

from entering into any particular transaction or class of transactions or give advice to any bank

cooperatives Assistance to any banking company in form of a loan or

Require an officer of the banking company to discuss anysuch matter with an officer of the Reserve Bank

epu e one or more o s o cers o wa c e procee ngsat any meeting of the Board of Directors


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35{4-(a)}, every Director/Officer of the bank shall bepunishable with fine which may extend to tw ice theamount of deposits unless he proves that the offence has

diligence For contravention of any of the provisions of the Act by any

person- fine of Fifty thousand rupees or tw ice thedefault, further fine of tw o thousand and five hundredrupees

For any default, every person who was in charge of/respons e o e an s a e eeme gu y o e auand is liable to be punished

Default committed with the consent / connivance of anyDirector, Manager, Secretary or other Officer- same asabove


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--

, , .

se r v a n t s, f o r t h e p u r p o se of Ch a p t e r I X o f t h e I n d i an Pe n a l Co d e

Since co-operative societies are controlled, financed and managed by the'

Any authority which is under the control of the Government of India is a State within the purview of Art. 12.Nationalised Bank is an authority and is controlled by the Government of India and is instrumentality of

eserve an o n a. s a s a u ory o y cons u e un er e a u e oug reg s ere un er e

Banking Act. Similarly, the word 'authorities' are very wide enough in Art. 12 of the Constitution of India andany authority which is an instrumentality or agency of the State falls within the purview of 'State' as defined inArt. 12 of the Constitution. Every employee of the State which falls within the purview of the 'State as definedunder Art. 12 automatically becomes the employee of the State. Every employee thus becomes the publicemployee because, he is an employee of the State. It will not be out of place to mention that number of co-o erative societies are controlled financed and mana ed b the State Government. Their em lo ees will also


become the 'public servant '


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punishable under Section 46 except uponcomplaint in writing made by an officer of RBI


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Section 47 A Section 47 A Power of ReservePower of ReserveBank to Impose PenaltyBank to Impose Penalty

.whichever is more and for continuing default a further penaltywhich may extend to Rs. 25, 000/ -

For contravention of Section 46 (3) penalty is twice the amount of deposits

Penalty to be payable within 14 days from the date on which

notice is issued by the RBI and in case of failure to pay, may beev e y r nc pa v our av ng ur s c on n e area No complaint shall be filed against any bank in any Court in

respect of penalty imposed by RBI for any contravention or

Particulars of statutory penalties and other specific supervisoryactions should be disclosed Press release by RBI and in the

Notes on Accounts by the bank


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Section 47 A Section 47 A Power of ReservePower of ReserveBank to Impose PenaltyBank to Impose Penalty

.

amount in default whichever is more and forcontinuing default a further penalty which mayextend to Rs. 25, 000/ -

For contravention of Section 46 (3) penalty is


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Section 55Section 55

c o c o o app y n c o c o o app y n relation to Cooperative Banks relation to Cooperative Banks

' ,

apply in relation to a Co-operative Bank as itapplies in relation to a bank as defined in Sec. 2of that Act

The Banking Companies (Legal Practitioners'' , ,

relation to a Co-operative Bank as it applies inrelation to a banking company as defined in Sec.

o a c .



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baking regulation act 3

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